Insurance - - INDUSTRY UPDATES -

Source: Bor­neo Post Online, 19 Novem­ber 2013

Bank Ne­gara Malaysia’s (BNM) an­nounced that the con­cept pa­per on life insurance and fam­ily taka­ful (LI and FT) re­leased on Novem­ber 7 may be the insurance sec­tor’s re-rat­ing cat­a­lyst. RHB Re­search In­sti­tute Sdn Bhd (RHB Re­search) high­lighted this in a re­cent note and ex­plained that the pro­posal’s fo­cus on en­sur­ing sus­tain­able op­er­at­ing costs, en­hanc­ing dis­clo­sure and im­prov­ing pol­i­cy­hold­ers’ value propo­si­tion should col­lec­tively boost pen­e­tra­tion, es­pe­cially in the mass mar­ket. Key mea­sures in the re­cent pro­pos­als in­clude the in­tro­duc­tion of the min­i­mum al­lo­ca­tion rate (MAR) to re­place com­mis­sion/op­er­at­ing cost lim­its (OL) on in­vest­ment-linked (IL) prod­ucts, par­tially-lib­er­al­is­ing OL for pure pro­tec­tion prod­ucts, boost­ing di­rect chan­nels (walk-ins, online), pro­mot­ing dis­tri­bu­tion chan­nels (which are agents, banc as­sur­ance and fi­nan­cial ad­vis­ers) and en­cour­ag­ing greater prod­uct trans­parency with en­hanced dis­clo­sure re­quire­ments and web ag­gre­ga­tors. RHB Re­search re­marked that pure pro­tec­tion poli­cies are to have com­mis­sion-free of­fer­ings via di­rect chan­nels. Th­ese are es­ti­mated to be 20 to 30 per cent cheaper than sim­i­lar prod­ucts sold through in­ter­me­di­aries. It sees this as a win-win for cus­tomers and in­sur­ers as it will boost insurance pen­e­tra­tion in the mass mar­ket, while al­low­ing savvy, ed­u­cated cus­tomers to pur­chase pure pro­tec­tion prod­ucts di­rectly or via an in­ter­me­di­ary. It also ex­pects agen­cies to re­tain their role in ser­vic­ing mid­dle to high-in­come cus­tomers.

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